Senior managers of PNG’S biggest superannuation funds outline their institutional investment strategies.

Two of the biggest institutions in PNG have some strict requirements before they will invest.

How do Papua New Guinea’s two largest super funds, Nambawan Super and Nasfund, make investment decisions on behalf of their members? According to two senior executives in the super funds, strict guidelines have to be followed to ensure they perform well in difficult economic conditions.

Paul Sayer, Chief Executive of Nambawan Super, says assets under management are growing fast. ‘It is running at about 11 per cent growth annually,’ he says.

‘So in about seven years it doubles; in 12 years you are looking at a fund that is K25 billion. With that comes challenges about where we invest.’

David Brown, Chief Investment Officer of Nasfund, says it, too, has challenges related to its growing size.

‘We are very large investors in the context of PNG in terms of complexity, the size of deals. The sort of things that we see in the PNG context are every bit the same as in Australia or New Zealand.’

Both executives says that the minimum investment they would consider is about K30 million. Sayer says his fund has an orientation towards growth assets of 56 per cent—lower than in Australia, where the average is about 65 per cent.

‘Currently, we have about 15 per cent offshore in equities; we have nothing offshore in fixed interest. We have 36 per cent in fixed interest, so we are certainly supporting the government. We have almost 10 per cent in cash, so we are looking for opportunities to invest. We hold about 14 per cent in property, and about 9–14 per cent in private equities.’

Sayer added that it is ‘hard to go into equities, listed and private’.

Outsourcing

Whereas the typical Australian super funds have about 90 per cent of their assets outsourced to fund managers, who invest in liquid markets, Brown says the obverse applies in PNG. ‘About 90 per cent we do ourselves,’ he says. ‘It is more satisfying.’

Brown says Nasfund garners a high yield on its investments. ‘The yield from our real estate portfolio would have any Australian chief investment officer salivating. But we have changed our strategy, we have focused on high occupancy and that requires a certain product—so we are trying to improve.’

Sayer says PNG’S recent foreign exchange restrictions can impede the fund’s ability to buy local companies because often they are foreign-owned and the sellers want to repatriate the funds offshore.

Both fund managers say when they seek to buy PNG companies, they look to bolt it on to another company so that the acquired company becomes part of another business.

The greatest issue, they acknowledge, is finding investments of sufficient scale in PNG. ‘We have to have fairly large deals,’ says Brown. ‘We are kind of outgrowing the local market, in a sense.

‘We would love to see a vehicle that would aggregate small investors. We are speaking to government about it. I think there is a lot of capital in the economy, but it is in stagnant pools. We would like to be able to mobilise that.’ 

Nasfund is an investor in poultry producer Mainland Holdings.